Rachel Reeves is facing protests over plans to hike landfill tax, which covers construction waste, that critics claim could drive up the cost of a new-build home by £24,000.

The Chancellor wants to scrap the lower landfill tax rate charged on waste such as topsoil, rocks and clay, and replace it with the much higher standard levy.

Industry leaders warn the move – a 36-fold increase – will push construction costs through the roof, forcing developers either to shelve housing projects or pass the extra burden on to buyers.

Currently, waste generated by housebuilders is charged at just £4.05 a tonne. Under Treasury proposals, it would be taxed at the full rate of £126.15 by 2030.

Business Waste, a waste management firm, estimates the change will see landfill costs per home rocket from £690 to £24,820. The Mineral Products Association (MPA) calculates the extra bill could be anywhere between £22,000 and £28,000 per house.

Graham Matthews, of Business Waste, told the Telegraph: “Builders may treat the increase as a permanent cost, which could ultimately be reflected in the prices paid by homebuyers.”

Latest Land Registry figures show the average new-build already sells for £368,354 – 43% more than existing properties.

Rico Wojtulewicz, of the National Federation of Housebuilders, warned: “Builders are just going to be leaving the industry entirely because they can’t make the numbers work.

“House prices will theoretically increase. I think there is a chance in some regions that developers may absorb some of it, but it’s more likely that development will be made totally unviable.

“Fewer homes will get built, which means high demand and lower supply, and that causes house prices to rise. It could be a complete and utter development killer – it’s insane.”*

Mark Russell, of the MPA, said the plan “risk[s] shutting down” much of the aggregates sector, adding that taxing inert materials such as chalk, clay or soils at over £125 per tonne “is as damaging as it is absurd”.

The tax was originally introduced in 1996 to encourage recycling, but ministers say the lower rate is increasingly open to fraud and illegal dumping. In 2022-23, waste crime cost the Treasury around £100million.

A consultation paper claimed the change would drive innovation in recycling and cut reliance on scarce natural resources, insisting: “Many materials subject to the lower rate, such as rocks and soils, have the potential to be recycled and reused.”

But opponents warn the move could hit not only housebuilding but also vital road and drainage projects. One housing scheme of 619 homes and a school that faced a landfill bill of £135,448 at the lower rate would instead be charged £4.2million.

Mr Wojtulewicz said: “This is going to create such a nightmare. It’s more than a 3,015pc uplift on the current price.”

Last night, the Treasury defended its position. A spokesman said: “We are delivering the biggest boost to social and affordable housing in a generation backed by £39bn investment and planning reforms, driving UK housebuilding to its highest level in over 40 years as part of our Plan for Change to build 1.5 million new homes and end the housing crisis.

“No decisions have been made on changes to landfill tax, and we remain committed to working with businesses to understand the impact of the proposals.”